Today I am looking whether these three market movers are worthy investment candidates.
UK Mail Group
Delivery specialist UK Mail (LSE: UKM) has lit up the FTSE in Tuesday business and was up as much as 5.3% earlier in the day. Indeed, the company has enjoyed a sterling run during the past week, after last weeks interims showed UK Mail once again juggle record parcel volumes during the Christmas period.
The business is investing heavily in order to profit from ever-increasingly parcels traffic, underpinned by galloping e-commerce activity, and is on course to open its brand-new, state-of-the-art automated hub in May. And the timing could not come at a better time as it aims to attract customers from the now-defunct City Link.
City analysts expect UK Mail to record a meagre 1% earnings slip in the year concluding March 2015. But the couriers bottom line is expected to snap higher from next year onwards, with advances to the tune of 8% and 9% chalked in for fiscal 2016 and 2017 respectively.
Such projections leave the company dealing on P/E multiples of 14.7 times and 13.7 times for these years, falling inside the benchmark of 15 times thatmarks attractive value for money. And income chasers will be encouraged by the firms progressive dividend policy, which throws up delicious yields of 4.5% for 2016 and 4.7% for 2017.
Like UK Mail, natural resources giant Vedanta Resources (LSE: VED) has enjoyed a stellar performance in Tuesday business and is up 8.4% as I write, leading the FTSE higher. However, I believe that this bubbly rise is nothing more than a deadcat bounce, and expect prices to train lower again on the back of declining commodity prices Vedantas share price has shed around50%% overthe past three months alone.
Despite fears of worsening oversupply in key markets, the fossil fuel and metals giant remains committed to ramping up output and plans to prioritise investment in its zinc and oil and gas divisions. On top of this Vedanta is also looking to boost capacity across its aluminium assets and is looking to get production from its iron ore and copper projects flowing higher again.
This strategy mirrors actions by the worlds other major mining and oil plays, and hardly does the chronic oversupply problem besetting natural resources markets any favours. The business is expected to record a 5% earnings decline in the year concluding March 2015, but improvements to the tune of 69% and 82% are anticipated for 2016 and 2017 correspondingly.
Still, I reckon that these forecasts are fanciful at best given the precarious state of the global economy, and that P/E multiples of 9.6 times and 7.4 times for these years are a fair reflection of the huge risks facing Vedanta rather than representing good value for money.
And, like Vedanta, I believe that Enquest (LSE: ENQ) is also a precarious proposition for those seeking dependable earnings growth. This view is shared by patchy investor sentiment in Tuesday trading, with the company trading down around 1.7% at the time of writing.
The oil explorer continues to mirror movements in the oilprice, with Brent sliding again to around $48.60 per barrel recently. Enquest is anticipated to get production at its Amla/Galia asset on stream next year, but should the commodity price continue to lag exacerbated by persistent cost pressures then the business may be forced to re-evaluate the economics of the project.
News today that natural resources glutton China saw growth slow to 7.4% in 2014 the lowest rate of growth for almost a quarter of a century did nothing to assuage these concerns. The company is expected to see earnings dip 60% in 2015, although a 179% upswing is anticipated for 2016 as group production spews forth.
These figures push the P/E multiple from 131.1 times for this year to 5.6 times for 2016. Investing in oil has always been a high-risk, high-reward game, but I believe the colossal structural problems facing the market should make investors think twice about buying the likes of Enquest.
But regardless of whether you fancy ploughing your hard-earned wonga into any the stocks mentioned above, I strongly recommend you check out this brand new and exclusive report that singles out a hatful of FTSE 100 winners set to jump start your investment income.
Our “5 Dividend Winners To Retire On” wealth report highlights a selection of incredible stocks with an excellent record of providing juicy shareholder returns. Among our picks are top retail, pharmaceutical and utilities plays that we are convinced should continue to provide red-hot dividends.
Click here to download the report — it’s 100% free and comes with no further obligation.
Get FREE Issues of The Motley Fool Collective
Get straightforward advice on whats really happening with the stock markets, direct to your inbox. Help yourself with our FREE email newsletter designed to help you protect and grow your portfolio wealth.